Energy Prospectus

Second Quarter 2022 and Recent Highlights:

Sales volumes of 502 Bcfe < Compares to my forecast of 509 Bcfe.

Total per unit operating costs of $1.37 per Mcfe

Capital expenditures of $376 MM or $0.75 per Mcfe

Net cash provided by operating activities of $230 MM, adjusted operating cash flow of $916 MM and free cash flow of $543 MM < Adjusted operating cash flow came in lower than my forecast of $1,127.7 million.

Increased quarterly base dividend by 20 percent to $0.15 per share ($0.60 per share annualized)

Raising '22 – '23 debt reduction target to $2.5 B, an increase of $1.0 B

Retired $175 MM of senior notes during and subsequent to the end of Q2

Repurchased $213 MM of convertible notes, including $85 MM of principal, during and subsequent to the end of Q2, reducing fully diluted share count by 5.7 MM shares

President and CEO Toby Z. Rice stated, "We had a solid operational quarter, with material gains in completion efficiency despite a continued tight oilfield service backdrop. This facilitated almost $550 million of free cash flow during the quarter, bringing our total year-to-date free cash flow to more than $1.1 billion."
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Obviously a good quarter, but I was expecting a bit more. My valuation of $62.00 per share was based on just 5X Operating CFPS, which is a very conservative multiple for a company of this size. I will spend more time on it tomorrow, but my valuation won't change much. AR's much higher liquids content gives it the edge on EQT.

Your model was right on the money except O/S shares which caused the EPS miss

I'm impressed with the CEO > very sharp guy

Dan--off the top of your head, who do you think would be the biggest beneficiary of the Mountain Valley p/l being completed? I'm guessing either CTRA or EQT. There is some chatter that the Manchin energy bill could open the way for it's completion. Thanks in advance.

The Rice brothers have a fabulous record in the energy patch. Their father is Dan Rice. He has been managing energy investment for 40 or 50 years with Loomis Sayles, State Street and now run a Boston hedge fund. A great and effective team.

My guess is that EQT will benefit the most when the Mountain Valley Pipeline is finally completed. CTRA and RRC should also benefit.

AR seems to have the best pipeline access. Take the time to listen to the replay of AR's Q2 CC and you will be impressed.

My valuation of EQT will probably be going up, but I am still waiting on them to post their 10Q to their website.